SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of November 30, 2000, is made by and between
NACO INDUSTRIES, INC., a Utah corporation (the "Borrower"), and XXXXX FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").
Recitals
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The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of April 22, 1999, as previously amended (the "Credit
Agreement"). Capitalized terms used in these recitals have the meanings given to
them in the Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"Interest Rate Margin" means three and one-half percent
(3.5%); provided, however, that if no Default Period then exists and
the Borrower's audited financial statements for the Borrower's fiscal
year ending November 30, 2000, demonstrate that the Borrower's Net
Income equals or exceeds $100,000, the Interest Rate Margin shall be
reduced by one-half of one percent (0.5%) on the first day of the month
following the month such financial statements are delivered; and
provided further that if no Default Period then exists and the
Borrower's audited financial statements for the Borrower's fiscal year
ending November 30, 2001, demonstrate that the Borrower's Net Income
equals or exceeds $150,000, the Interest Rate Margin shall be reduced
by one-half of one percent (0.5%) on the first day of the month
following the month such financial statements are delivered.
"Inventory Advance Rate" means, from December 1, 2000, through
May 31, 2001, 70%; from June 1, 2001, through November 30, 2001, 65%;
and at all other times, 60%.
"Maturity Date" means April 30, 2003.
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2. Section 6.13 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 6.13 Minimum Book Net Worth. The Borrower will
maintain, as of each date described below, its Book Net Worth at an
amount not less than the amount set forth opposite such date:
Date Minimum Book Net Worth
---- ----------------------
November 30, 2000 $703,000
February 28, 2001 $633,000
May 31, 2001 $838,000
August 31, 2001 $833,000
November 30, 2001 and the
last day of each quarter thereafter $768,000"
3. Section 6.14 of the Credit Agreement is hereby amended to read in
its entirety as follows;
"Section 6.14 Minimum Net Income. The Borrower will achieve as
of each date described below, cumulative Net Income of not less that
the amount set forth opposite such date (amounts shown in parentheses
are negative);
Date Minimum YTD Net Income
---- ----------------------
November 30, 2000 $(20,000)
December 31, 2000 $(114,000)
January 31, 2001 $(130,000)
February 29, 2001 $(110,000)
March 31, 2001 $(45,000)
April 30, 2001 $40,000
May 31, 2001 $95,000
June 30, 2001 $140,000
July 31, 2001 $140,000
August 31, 2001 $90,000
September 30, 2001 $75,000
October 31, 2001 $50,000
November 30, 2001 $25,000"
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4. Section 6.15 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 6.15 New Covenants. On or before October 31, 2001,
the Borrower and the Lender shall agree on new covenant levels for
Sections 6.13, 6.14 and 7.10 for periods after November 30, 2001. The
new covenant levels will be based on the Borrower's projections for
such periods and shall be no less stringent than the present levels."
5. Section 7.10 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Section 7.10 Capital Expenditures. The Borrower will not
incur or contract to incur Capital Expenditures of more than $200,000
in the aggregate during any fiscal year."
6. No Other Changes. Except as explicitly amended by this Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.
7. Waiver of Defaults. The Borrower is in default of Section 6.13 of
the Credit Agreement as of August 31, 2000, and Section 6.14 of the Credit
Agreement as of May 31, 2000, (collectively, the "Default"). Upon the terms and
subject to the conditions set forth in this Amendment, the Lender hereby waives
the Defaults. This waiver shall be effective only in this specific instance and
for the specific purpose for which it is given, and this waiver shall not
entitle the Borrower to any other or further waiver in any similar or other
circumstances.
8. Amendment Fee. The Borrower shall pay the Lender as of the date
hereof a fully earned, non-refundable fee in the amount of $5,000 in
consideration of the Lender's execution of this Amendment.
9. Conditions Precedent. This Amendment, and the waiver set forth in
Paragraph 7 hereof, shall be effective when the Lender shall have received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:
(a) The Acknowledgment and Agreement of Guarantor set forth at
the end of this Amendment, dully executed by the Guarantor.
(b) Payment of the fee described in Paragraph 8.
(c) Such other matters as the Lender may require.
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10. Representations and Warranties. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to
execute this Amendment and to perform all of its obligation hereunder,
and this Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the
articles of incorporation or by-laws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which
the Borrower is party or by which it or its properties may be bound or
affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement are correct on and as of the date
hereof as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date.
11. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
12. No Other Waiver. Except as set forth in Paragraph 7 hereof, the
execution of this Amendment and acceptance of any documents related hereto shall
not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Amendment.
13. Release. The Borrower, and the Guarantor by signing the
Acknowledgment and Agreement of Guarantor set forth below, each hereby
absolutely and unconditionally releases and forever discharges the Lender, and
any and all participant, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of any of the foregoing, from any and all claims, demands or causes of
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action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
14. Costs and Expenses. The Borrower hereby reaffirms its agreement
under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses and the fee
required under Paragraph 8 hereof.
15. Miscellaneous. This Amendment and the Acknowledgment and Agreement
of Guarantor may be executed in any number of counterparts, each of which when
so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
XXXXX FARGO BUSINESS CREDIT, INC. NACO INDUSTRIES, INC.
By: By:
-------------------------------- ------------------------------------
Its: Its:
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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of Naco Industries,
Inc. (the "Borrower") to Xxxxx Fargo Business Credit, Inc. (the "Lender")
pursuant to a Guaranty dated as of April 22, 1999 (the "Guaranty"), hereby (i)
acknowledges receipt of the foregoing Amendment; (ii) consents to the terms
(including without limitation the release set forth in Paragraph 13 of the
Amendment) and execution thereof; (iii) reaffirms his obligations to the Lender
pursuant to the terms of his Guaranty; and (iv) acknowledges that the Lender may
amend, restate, extend, renew or otherwise modify the Credit Agreement and any
indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the
consent of the undersigned and without impairing the liability of the
undersigned under his Guaranty for all of the Borrower's present and future
indebtedness to the Lender.
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Xxxxx Xxxx
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SUPPLEMENTAL SECRETARY'S CERTIFICATE
I, Xxxxx X. Xxxx, the secretary of Naco Industries, Inc., a corporation
formed under the laws of the State of Utah, hereby certify that the following
person presently is duly constituted, appointed and acting as an officer of said
corporation and is duly authorized to sign and to act generally on behalf of
said corporation and that the signature appearing below is the authentic and
official signature of said officer:
Name Title Sample Signature
---- ----- ----------------
Xxxxxxx Xxxxxxx President
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The officer named herein is designated in addition to any and all
persons previously designated as authorized to sign or to act on behalf of said
corporation.
IN WITNESS WHEREOF, I have hereunto subscribed by name this ____ day of
November, 2000.
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Secretary
Attest by One Other Officer
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